A 401(k) is a common type of retirement savings plan, but did you know many include investments in companies that pollute the atmosphere with noxious gases?
By making a few simple swaps, you can line up your nest egg with your values — all while padding your wallet in the long run.
What is a 401(k)?
A 401(k) is an employer-sponsored retirement account that lets you invest money from your paycheck — either pre-tax in the case of a traditional 401(k) or after paying upfront tax in a Roth 401(k). In some cases, an employer may match a certain percentage of the money you choose to invest.
Many companies automatically enroll employees into 401(k) plans that include mutual funds investing in the extraction of polluting fuels, deforestation, and other climate-harming practices.
How your 401(k) can hurt the environment
Since 100 million Americans have $10 trillion saved in a 401(k) or a similar retirement account, per an estimate cited by Bloomberg, shifting even a fraction of that money could drive transformational change. Unfortunately, if that money doesn't shift, companies that engage in climate-harming practices will be incentivized to continue.
These conventional retirement accounts contribute to massive amounts of carbon pollution — a $1 billion 401(k) plan produces emissions about equal to nearly 14,000 gasoline-powered cars. That's often larger than the company's own production of carbon, according to a report by the Business for Climate Finance Initiative cited by Bloomberg.
Most employees have no idea they're investing in a retirement they may not be able to enjoy — one that features hard-to-breathe air and frequent extreme weather events.
"There's 100 million people in the United States with $10 trillion in assets that have no idea that they're investing in their own destruction," said Andrew Behar, CEO of the shareholder advocacy group As You Sow, as reported by Bloomberg. "It's been completely hidden."
How to curate a "green" 401k
The good news? You have the power to pave a cleaner path.
- Use free digital tools like Fossil Free Funds to decode which companies your retirement investments currently support. Mutual funds with vague, generic names often include major polluters.
- Swap funds. If your employer offers a dirty-energy-free 401(k) option, assess switching some or all of your balance. If not, explore self-directed alternatives that let you cherry-pick greener funds.
- Pitch a better plan. Respectfully urge your HR or benefits department to add eco-conscious choices. More voices can drive systemic change.
With some simple research and upgrades, you can save for a secure future while also creating a secure future. Every one of us holds power beyond ourselves when we speak up.
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